http://www.bloomberg.com/apps/news?pid=20601013&sid=ac6Ma33jJln4

India may let power companies start trading renewable-energy credits in May in a push to create a multibillion-dollar market to encourage reductions in greenhouse-gas emissions.

“We’ll be moving toward completely market-driven renewable energy development with this,” Pramod Deo, chairman of the Central Electricity Regulatory Commission, the power regulator, told Bloomberg News in an interview in Mumbai yesterday.
India is pressing ahead with its own efforts to fight climate change after last month’s Copenhagen talks failed to reach a new global climate treaty. The move puts the world’s fourth-largest emitter ahead of China and other developing nations in creating a domestic emissions-trading market to boost investment in solar, wind and other clean-energy projects.
“This will become one of the most progressive regimes as far as renewable energy is concerned,” said Vinod Kala, managing director of Emergent Ventures India, a New Delhi-based consulting company that estimates trade in renewable energy credits could rise to as much as $10 billion by 2020.
“By April or May, we should have the Renewable Energy Certificate mechanism in place,” Deo said.
The plan would require power distributors including billionaire Anil Ambani’sReliance Infrastructure Ltd, Tata Power Co. and large-scale consumers to ensure a portion of the electricity they carry comes from renewable sources.
If their supply of clean energy falls short, companies must buy certificates from others with surpluses, an incentive for renewable-energy production and a more stable market. Similar rules exist in the U.K. and some U.S. and Australian states.
No Treaty
“Without a market-based mechanism, renewable energy would have required a large amount of subsidies,” Kala said. “This way you can let the market bear the financial burden rather than government. A proper forward trade of RECs will also let you better assess the financial feasibility of renewable energy projects.”
India rejected binding emission targets on greenhouse gases, saying they might hamper industrial growth, at international climate negotiations in Copenhagen. Without a global climate treaty governing developing countries, the government is moving ahead with efforts to combat climate change by setting up a domestic market for trading emissions credits.
The latest development follows plans to set up a parallel system for trading credits from energy-saving projects, which is expected to grow into a $16 billion market in five years, Ajay Mathur, director-general of India’s Bureau of Energy Efficiency, said last week.
Power Exchanges
The renewable and energy-savings credits will both trade on the country’s two power exchanges, creating a domestic market that may rival India’s $4 billion-$6 billion international trade in carbon credits if the government’s projections are accurate, said Pranav Nahar, managing director of Evolution Markets, a New Delhi-based carbon finance company.
India is the second-largest generator of carbon credits in the United Nations Clean Development Mechanism, the world’s second-biggest greenhouse-gas trading market. Certified Emissions Credits, or CERs, issued for pollution-cutting projects in India are sold to businesses in Europe and elsewhere seeking to meet either mandatory or voluntary limits.
“It will take at least one year for liquid trade to begin” in renewable energy and energy-saving credits, said Nahar. In time, they will likely be traded interchangeably with CERs, he said.
Separate targets and certificates will be issued for solar versus other renewable sources to ensure investment in the more- expensive solar industry, Deo said.
Credits will have a life of 365 days, plus a grace period, and won’t be transferrable. They will trade in a price band that will be adjusted periodically, he said.